Settle with BOA or file bankrupcy?

[Anonymous]

I have a gold option loan with BOA for $43,000, my husband that had his name removed from the account and is refusing to help me pay it. I have asked if they could lower the payments currently $718 a month but because of the type of loan the only adjustment that could be made would increase the payment to over $800. They have offered to settle for $13,500. I just found out that the forgiven amount is considered income that would have to be reported on my taxes.  My income is $40,000 this would increase my income to $69,500. I am deathly afraid that if I accept this offer that will end owing thousands in taxes yet I do feel responsible for the debt and think I should paid BOA for extending the credit.  My husband says I should forget the settlement and file chapter 7.  He' says my credit is ruined either way. He is willing to pay for a bankrupcy lawyer only.  

Any advice on whether I should accept the settlement or file bankrupcy? I need to give BOA an answer by Friday

[Jazzzy]

Hi...and welcome to the forums.

This is tough advice to give without knowing the rest of your financial picture. These are questions I would have...

Is this the only debt that would be included in the bankruptcy?

Do you have ongoing income that is sufficient to make these monthly payments and your other monthly expenses?

How are your credit reports now...are there any late payments, charge-offs, etc.?

I hope you can let us know these things. They have an impact on your decision, and I'm sure others might have questions as well. Without knowing the answers to these questions, I would say the following...

If $13,500 is the amount that would cause a bankruptcy...and if you can pay that $13,500...then you may not want to do a bankruptcy. That's a small amount in the scheme of life to put you into bankruptcy. Please don't decide not to do this because you will have some extra income taxes. This will not add that much to your taxes. And...if you can't pay the IRS all at once...they will take payments. You just need to be up front with them.

I guess I would also ask...can you share your husband's logic in his stance of only helping you if you file bankruptcy rather than in helping you make this settlement?

[Anonymous]

This is the only debt that would be included in the bankrupcy.  I have just one credit card with a limit of 1600.  With husband's help the household expenses are covered.  The only blip on my credit is this account, it's behind 4 months.  My husband was paying the account but says that technically he was not responsible so he stopped paying it leaving the payments to me.  I just don't have the net income to pay 700 or 800 a month.  I should say that the credit union is willing to loan me the money with hubby as co-signer (I have letter from BOA explaining the circumstances). The payment to the credit union would be affordable  for me. 

Regarding the bankrupcy I can see his point I just don't want my credit ruined for ten+ years.

[Jazzzy]

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@Anonymous wrote:

This is the only debt that would be included in the bankrupcy.  I have just one credit card with a limit of 1600.  With husband's help the household expenses are covered.  The only blip on my credit is this account, it's behind 4 months.  My husband was paying the account but says that technically he was not responsible so he stopped paying it leaving the payments to me.  I just don't have the net income to pay 700 or 800 a month.  I should say that the credit union is willing to loan me the money with hubby as co-signer (I have letter from BOA explaining the circumstances). The payment to the credit union would be affordable  for me. 

Regarding the bankrupcy I can see his point I just don't want my credit ruined for ten+ years.

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When your husband says he is not technically responsible, is that the case? Is this loan in your name only? What is BOA saying about his responsibility?

Is your husband refusing to cosign the credit union loan for the settlement amount?

He is correct that this account will show as a settlement on your credit reports, but that will not do the damage that a bankruptcy would do.

I still think it's a shame to declare bankruptcy for one bill...especially a bill that you can escape almost $30,000 by settling. That's a pretty remarkable offer BOA has made. Is it the case where he could cosign, and the payments could be taken directly from your personal checking account each month? I don't understand why he wouldn't cooperate with that. You still keep the personal responsibility for paying the $13,500.

What type of loan was this? Was it a consolidation loan...a loan to buy an asset...a business loan?

[Anonymous]

It was orginally in both of our names. He put in a dispute and they were not a able to produce his signture making him a co-owner on the account.  He won the dispute and  BOA  had to remove his name from the account. It is no longer being reported on his credit so he is free and clear. The debt is mine alone.

I know the 13,500 settlement is a great deal, even with the possibility of having pay additional taxes.  I just wanted confirmation that I am doing the right thing.

It was an unsecured line of credit with a limit of 50,000. 

He is very stubborning helping me afford the settlement.  I think I feel a greater sense of paying back BOA than he does.  

[Jazzzy]

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@Anonymous wrote:

It was orginally in both of our names. He put in a dispute and they were not a able to produce his signture making him a co-owner on the account.  He won the dispute and  BOA  had to remove his name from the account. It is no longer being reported on his credit so he is free and clear. The debt is mine alone.

I know the 13,500 settlement is a great deal, even with the possibility of having pay additional taxes.  I just wanted confirmation that I am doing the right thing.

It was an unsecured line of credit with a limit of 50,000. 

He is very stubborning helping me afford the settlement.  I think I feel a greater sense of paying back BOA than he does.  

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Not too many guys are that stubborn about saving $30k. I think you've made a good decision to settle.

It may be worth addressing what is called "pay for delete" with BOA. If you tell BOA that you accept their offer of $13,500 for the settlement, why not tell them that you would like to "pay for delete." That means that when you pay the $13,500, they take the entire account off your credit report. That way you have no credit damage from this loan. Even the late payments are gone off your report.

If you are interested in exploring that possibility (and...I would...it certainly doesn't hurt to ask...), then do some reading in the Rebuilding Your Credit forum. It is commonly referred to as PFD (search for that term). You and BOA need to agree to this in writing before you pay BOA the money, but it may be a way of getting this off your history. That might be a surprise to your husband.

[MarineVietVet]

my husband that had his name removed from the account and is refusing to help me pay it.

My husband was paying the account but says that technically he was not responsible so he stopped paying it leaving the payments to me.

I wish you only the best in this financial crisis and in your marriage.

Edited to take out what I really think.

Message Edited by marinevietvet on 12-16-2009 11:02 AM

[Anonymous]

Thank you I will definitely inquire about them about  deleting the account from my history.

my husband that had his name removed from the account and is refusing to help me pay it.

My husband was paying the account but says that technically he was not responsible so he stopped paying it leaving the payments to me.

I wish you only the best in this financial crisis and in your marriage.

Edited to take out what I really think.

I hear you.  That's why I want to handle this the best way I can with the least amount of damage as possible. 

[IOBA]

Bank of America will send a 1099-C for the $29,500.

The IRS considers this as income.

The IRS taxes that amount ($29,500) 40-60%.  

Translation, it could add $11,800-17,700 to your tax liability.

Learned all of this from an "error" that Bank of America made on a 1099-C.

To both, you and hubby.  We don't have all of the information as to what is going on between you, hubby, and the money.  But if you both file jointly, then you both will be affected by the tax liability.

Bank of America should let you make payments on the settlement amount.  

IMO, settle, then file your tax return as a joint with hubby.